Venture capital will thrive even if tech IPOs don't

  @FortuneMagazine December 19, 2013: 6:13 PM ET
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Here are two basic facts about business cycles: (1) They exist, and (2) people often dispute that, particularly in the midst of a prolonged top or bottom. So it has been for venture capital since the dotcom bubble burst more than a decade ago, with even industry insiders adopting defeatist language about their "broken model." The worst came in 2010 when median 10-year performance turned negative and a slew of longtime institutional investors began to abandon all but a small handful of VC firms. If venture capital had always been a cottage industry, it had become that cottage's supply closet.

In 2013, however, the negative narrative flipped with ferocious speed: more IPOs, rising returns, and broad-based success that included, but was not defined by, Bay Area Internet companies. The turnaround knocked nonbelievers upside the head with giant bags of money and will help enable the next great wave of innovation. Even if tech valuations sag or the stock markets sink, venture capitalists will have full wallets. By proving the cycle, 2013 has created something sustainable for 2014 and beyond.

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